Nigeria records $85.21bn net foreign liabilities – IMF

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Nigeria’s foreign liabilities stood at $187.36 billion while the country’s foreign assets amounted to $102.15 billion as of December 2020, the International Monetary Fund (IamF) has said.

From 2016, Nigeria’s foreign liabilities jumped by 42.41 per cent from $131.56bn, while foreign assets rose by 13.67 per cent from $89.87 billion.

Foreign assets are the investment securities owned by the Nigerian government, companies, or Nigerians in foreign countries while foreign liabilities are assets owned by foreign governments, corporations and individuals in Nigeria.

This places Nigeria’s Net International Investment Position, which is foreign assets less liabilities at -$85.21 billion as of December 2020.

Corporate Finance Institute, a Canadian finance repository, says that a positive NIIP makes a country a net creditor while a negative NIIP implies that the country is a net debtor.

CFI also said the NIIP was a measure of a country’s financial condition and its sustainability to take on more financial credit.

At -$85.21 billion, foreigners own more assets in Nigeria than the value of foreign assets owned by FG, the state governments, Nigerian-owned companies and Nigerian individuals.

To understand Nigeria’s creditworthiness, the IMF measures the NIIP as a percentage of a country’s GDP. With a GDP of $432.30 billion (World Bank), Nigeria’s NIIP stood at -19.71 per cent as of December 2020.

Alessandro Turrini and Stefan Zeug of the European Commission’s Directorate-General for Economic and Financial Affairs in a 2016 paper titled ‘Benchmarks for Net International Positions’ stated that the median value of NIIP norms which account for balance of payments and consistency with healthy financial position is set at -17 per cent of GDP.

At -19.71 per cent, Nigeria’s current account deficits due to lower earnings from oil revenues in 2020 places the country below the benchmark.

However, the same paper says that when measuring the immunity of a country against the risk of external crises which is measured by a separate metric called NIIP prudential, the median value ‘is about -44 per cent of GDP’.

Prof. Jonathan Aremu, a consultant to the Economic Community of West African States Common Investment Market, told our correspondent that to properly understand Nigeria’s peculiar situation, we need to look at the nature of our foreign investment inflows.

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